A MINOR DISPLACEMENT
(C)1994 Alan M. Schwartz
On 09 December 1994 Orange County, California filed bankruptcy to
the tune of $1.2 billion, the largest bankruptcy filing in the
history of the United States. Sophisticated Federal, state, and
market regulatory mechanisms immediately and automatically cut
in, exacerbating the collapse of pension funds, the bond market,
and the banking system. Official explanations were enveloped by
smoke and mirrors. Spin doctors erected an abstruse facade
sufficiently protected by complexity from criticism, sound bites,
and even analysis. Rumor had it that Smilin' Bob, the County Tax
Assessor, had been doing his "goes-intos" with a Pentium.
At least our financial watchdogs had the good sense to pop the
balloon at the end of 1994, thereby securing a tax write-off for
the entire year. That sort of far-seeing managerial expertise is
guaranteed to win them major productivity bonuses at Christmas.
Like they tell you in Business School, if you do not reward your
best people, you will lose them.
Bankruptcy is the mechanism whereby the assets of a business are
rescued from creditors' predation and given to lawyers instead.
The lawyers' estimated fees - appointed conservators and their
lawyers in turn (it's the law!) - are seized by the Court and
safely placed in escrow before anybody else gets to dip into the
remains. What a tragedy it would be if the cupboard were found
to be bare when the sharks came to feed! (What if there are no
corporate assets at all? Legal counsel "pierces the corporate
veil" and goes after the corporate officers, the Members of the
Board, and maybe the janitorial staff. Business is business.)
The Irvine Company, rapacious predator of all that is valuable -
or at least pawnable - in Orange County, took a major bath. The
buzzards had been chomped by the jackals, who in turn were about
to be consumed by Federal fiscal SWAT teams and trial-by-media.
Orange Countians watched the bloodbath bloat, drowning careers at
the highest levels of pecuniary corruption. They regarded the
whole circus with no worse than mixed feelings.
What will become of America's hotbed of recondite Republicanism?
In a single day the value of Orange County bonds dropped by 50%.
The citizenry wonders if there will be cops on the beat and
firemen at their posts; whether the schools will be open and
Cable will operate; and whether they can get away with doing 120
mph on the 5, 55, and 405 freeways between Laguna Beach and
Anaheim. A shrewd investor could snatch up some of this planet's
most desirable real estate lock, stock and piggy bank for a
pittance (Michael Huffington take note).
What can we do? We can make a Top Ten list, and laugh at the
carnage ensuing among the wealthy and the powerful. Remember the
Eleventh Commandment and keep it wholly: DON'T GET CAUGHT!
TOP TEN LIST OF ORANGE COUNTY SAVIORS
10) Hollywood options the property; pledges an abundance of
accountants who can add 1+1 to obtain any sum solicited.
9) Intel has designs on Orange County; declares bankruptcy "a
feature, not a flaw."
8) Lee Iacocca takes over for $1.00/year until crisis is solved.
Airbags are already in place.
7) Hillary Ramrod Clinton invests. Orange County is solvent
within nine months. All its Republicans are discovered to have
committed suicide by shotgun blasts to the backs of their heads.
6) H. Ross Perot buys in. A giant sucking sound is heard.
5) Every freeway is expanded two more lanes. Orange County
disappears under a protective layer of concrete.
4) Bill Gates logs on Orange County as a Microsoft beta test
site for life, the universe and everything ("Windows 2001").
3) Disney rebuilds Orange County, audioanimating the Happiest
Polity on Earth.
2) South Coast Plaza simply expands to its natural limits.
1) O.J. Simpson kills the deal, even though he wasn't there.
The folks who run Orange County, as opposed to its politicians,
are no fools. They saw that after decades of desperately
imploring Washington for aid and getting zilch, the Northridge
earthquake opened Federal coffers for Los Angeles burghers to the
tune of $5 billion. Well then, why not? As long as the lame
duck Clinton Presidency was headed into the La Brea Tar Pits of
history, why not be the first in line to pluck the corpse?